Gifting Money to Family Member in Australia (2024)

• September 15, 2024

Australia does not have a specific gift tax. Individuals can give any amount to family members without taxing the gift.

However, while giving a gift itself is not taxable, if the gift involves transferring assets such as property or shares, the giver may be subject to Capital Gains Tax (CGT) if the asset has increased in value since it was acquired.

For recipients of government benefits, including pensions, there are rules about how much can be received as a gift before it affects their benefits. The Department of Human Services sets a gifting limit of $10,000 in one financial year or $30,000 over five financial years. Gifts above these amounts may affect the recipient’s eligibility for certain benefits.

For inheritance, while not taxable, giving significant gifts can have implications on the estate of the giver after their death, potentially affecting the distribution of the estate and inheritance tax implications for the estate.

Will I have to pay taxes on a gift given to a family member in Australia?

Here’s a breakdown of whether you’ll need to pay taxes on a gift given to a family member in Australia, along with important considerations:

Generally speaking, there is no predetermined gift tax in Australia

• Australia does not have a specific “gift tax”. Gifts generally aren’t considered taxable income for the recipient in Australia.
• You, the giver, are also unlikely to incur any tax liability when giving a gift to a family member.

Important Exceptions and Things to Consider

• Capital Gains Tax (CGT): If you’re gifting an asset rather than cash (e.g., property, shares), Capital Gains Tax might apply. If you sell the asset for a profit, you could be liable for CGT on the gain.
• Income from Gifting Assets: If the asset you gift (e.g., investment property) generates income for your family member, that income will be taxable in their hands according to regular income tax rules.
• Foreign Residents: Special rules apply if you, as the giver, are not an Australian tax resident. It’s advisable to get professional advice in this situation.
• Large Gifts and Centrelink: If you’re receiving a pension or benefits from Centrelink, large gifts might impact your eligibility. Check with Centrelink for details.

Additional Notes

• State or Territory Taxes: While unlikely, it’s always a good idea to check with the relevant state or territory revenue office where you and the recipient reside, just in case of any local taxes.
• Record-Keeping: Even though there’s generally no tax liability, keeping records of the gift (what it was, date, value) is good practice.

Recommendation

While gift tax is generally not a concern in Australia, the specifics of your situation might make it wise to consult an expert will lawyer in Australian tax law. They can provide a more personalised assessment and guide you on potential reporting obligations.

How Much Money Can You Receive As a Gift Tax-Free in Australia

There is generally no gift tax. Individuals can receive gifts of any value without paying tax on the amount received. This means there is no specific limit to how much money you can receive as a gift without it being taxed.

However, it’s important to consider a few related tax implications:

1. Capital Gains Tax (CGT): If someone gifts you an asset (like property or shares), the CGT implications for the giver could be substantial, depending on the asset’s cost base and its value at the time of gifting.
2. Centrelink and Social Security: For those receiving government benefits, receiving a large gift may affect your eligibility or the amount you receive, as it may be seen as part of your income or assets.
3. Documentation: It’s often wise to document any large gifts to ensure clarity for both parties and for any necessary financial records, particularly if the gift might later be questioned by authorities or during legal disputes.

No specific annual exemption limits exist like in some other countries, making the process straightforward from a tax perspective.

Can a family member’s gift be taken away if they go bankrupt?

Yes, unfortunately, a family member’s gift can potentially be taken away if they go bankrupt in Australia. Here’s why:

How Bankruptcy Works

• When someone declares bankruptcy, their assets (with some exceptions) are transferred to a trustee.
• The trustee can sell the bankrupt person’s assets to distribute the proceeds among creditors.
• Gifts received by the person before or even during bankruptcy may be taken by the trustee and used to pay creditors.

When a Gift Can Be Taken Back

These are the key conditions under which a gift could be considered recoverable:

• Undervalue Transactions: If you gave a gift significantly below its market value, the trustee may consider it an attempt to undervalue your assets and avoid creditor obligations. This is more likely if bankruptcy was imminent when you gave the gift.
• Time Period: In Australia, there’s a 5-year look-back period for potential undervalue transactions, meaning if the gift was within this period before bankruptcy, it’s at higher risk of being investigated. In some cases, even more extended periods could be scrutinised.
• Intention: If the gift appears to have been intended to reduce the person’s assets to avoid paying creditors, the trustee has a stronger case to take it back.

Not All is Lost

There are some situations where a gift may be protected:

• Small Gifts: Small, customary gifts (e.g., birthdays, holidays) aren’t likely to be targeted.
• Timing: Gifts made well before any signs of financial trouble are less likely to be scrutinised.

How Much Money Can Be Legally Given To A Family Member As A Gift In Australia?

Considering a generous gift to a loved one but unsure about the legal limits in Australia? Walker Pender can guide you through the intricacies of gifting laws, ensuring your act of kindness is legally sound.

With our expertise, you can navigate tax implications and legal thresholds effortlessly. Let us help you make informed decisions, securing your peace of mind while you spread joy within your family.